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Charles John Koch, take a bow!
By our reckoning, the chairman of Charter One Financial Inc. negotiated the best bank sale in the U.S. this decade when he sold out to Royal Bank of Scotland Group plc in 2004. Who are the other top bankers?
We reached that conclusion in a quick survey of banks that changed
hands during the boom of 2003 to 2006, when U.S. bank deals were all
the rage, and banks were commonly being bought out at 2.5 to 3.5 times
their book value.
Journalists, analyst and bankers at the time were agog at the valuations being paid, but one aspect was overlooked: acquisition currency. A few years and one financial crisis down the road, we've re-examined the acquisition to see who got the best deal in terms of accepting acquisition currency that maintained or increased its value. Consider the case of SouthTrust Corp., which sold out to Wachovia Corp. in June 2004 for $14.2 billion in stock. It sold out at 3.2 times book value, which at the time looked rich. In the conference call, chairman Wallace Malone stressed that one thing he liked about the deal was the fact that it was an all-stock sale. Wachovia shares represented good value, he said, and offered further upside for shareholders. Uh-oh. Wachovia shares have lost three-quarters of their value since then. So here is an incomplete and unscientific assessment of some notable bank sales this decade, based on long-term strength of the acquisition currency. Size does matter in this list, because it's harder to find a buyer with $10 billion in cash than $1 billion in cash. No. 7. Jamie Dimon, Bank One Corp. He deserves a higher ranking, but he's had enough glowing praise lately. When Dimon sold Bank One in January 2004, he got $58 billion at a valuation of 2.7 times book value. All of it was in stock. But it was J.P. Morgan Chase & Co. stock, and it has risen 13% since then. The deal was good strategically and in terms of long-term shareholder value. No. 6. J. Barry Griswell, Principal Financial Group. Des Moines, Iowa-based Principal only got 1.3 times book value when it sold its mortgage servicing business in May 2004. But it took $1.3 billion in cash, rather than the stock of the purchaser, Citigroup Inc. A move to get out of mortgages middecade in a billion-dollar-plus cash deal has to be considered a good deal. No 5. Glen E. Roney, Texas Regional Bancshares Inc. The smart guys early in the decade sold out to European banks, who wanted U.S. beachheads but didn't want to list their stock here, so they paid cash. Texas Regional fit nicely into that group, agreeing to sell out to Spain's Banco Bilbao Vizcaya Argentaria SA for $2.16 billion in cash for a valuation of $3.3 times book. A sweet deal. No. 4. William Ryan, BankNorth Group Inc. No one was overly impressed when Ryan sold 51% of his bank's stock to Toronto-Dominion Bank in August 2004 for $3.8 billion. It proved a great deal. The Canadian bank subsequently bought out the rest of the BankNorth stock on the way to building up a Northeastern banking giant. Half the deal was in cash and the other half was in TD stock, which has since risen 80% in U.S. dollars. No. 3. Stephen H. Gordon, Commercial Capital Bancorp. This Irvine, Calif., bank isn't listed here because it sold out in April 2006 for $983 million, nor because it achieved a valuation of 3.1 times tangible book value, nor even because it accepted cash. It is named here because Gordon did not accept the stock of the buyer, Washington Mutual Inc. That $983 million would be virtually worthless today if he had. No. 2. Walter A. Dods Jr., Community First Bankshares Inc. Fargo, N.D.-based Community First Bankshares was an illogical amalgam of tiny banks in 12 western states. Yet somehow in March 2004, the bank pried $1.2 billion from the clutches of BancWest Corp., a unit of BNP Paribas SA of France, for its far-flung network. That's equal to 3.3 times book value, all of it in cash. No. 1. Charles John Koch, Charter One. Koch hit a grand slam in 2004 when he sold his Cleveland-based bank to Royal Bank of Scotland Group plc. He sold for $10.5 billion -- in cash. The valuation was 3.0 times book value. Fantastic. But here's the most impressive thing. Sources told The Deal at the time that Koch shopped his bank and had a few offers, but RBS was the only one offering all cash. He declined stock offers from other Ohio banks, like Fifth Third Bancorp of Cincinnati and KeyCorp of Cleveland. Those shares have been massacred in the credit crisis. - Peter Moreira Categories Deal Video
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